Not Paying Off Credit Card Debt May Help
Debt Settlement Companies Are Better Placed to Assist
Aug 30, 2009
Whilst paying monthly charge card bills is always advisable, not everyone can afford to do so. There comes a point when a person's debt-to-income ratio becomes unsustainable. Many individuals continue to struggle on at great cost to their health.
Those considering a debt relief program are likely to find that not paying-off credit card debt will improve their bargaining position considerably. The sooner the debt is defaulted on, the more quickly debt settlement companies will be able to help.
Why Not Paying Off Credit Card Debt is so Important
Debt settlement companies are better placed to help those who aren't already paying off credit card debt each month. Until scheduled repayment is at least 120 days past its due date, the account of the cardholder won't have been passed to a collection agency.
This means that it isn't construed as a bad debt and creditors will not be prepared to amend the terms. This means no reduction to the principal (amount owed) or monthly repayments. Once a bad debt is sold-on to a collection agency, the negotiation process can commence.
How Debt Settlement Companies Work
An intermediary will negotiate with debt collections agencies in order to achieve a reduction in the principal and monthly payments. They may be able to clear up to 50% of unsecured debt. This means that payment becomes more affordable for the debtor
Once a debt relief program is in-place, paying-off credit card debt takes place over a 12 to 36 month period. It may be possible to increase the term, but this is not advised. Creditors are proven to be far less likely to agree as it takes longer before they receive payment.
Debtor's are advised to do plenty of homework before signing-up to a debt settlement program. Whilst management charges will amount to 15% of cumulative contributions, avoid any plan where the fees are front-loaded (charged up-front).
Dealing with Debt collectors
All dealings with collection agencies will be taken care of by the intermediary. In practice, these are likely to stop once a debt relief program is in place. Having a real person to turn to can alleviate a lot of the pressure associated with owing money.
Not paying off credit card debt for at least 120 days is simply a means to an end. It means that it will be sold on to a collection agency as a bad debt which allows debt settlement companies to negotiate more favorable settlement terms than are currently available.
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
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